The psychological limits to market efficiency

Herman Brodie | Prospecta | 20 February 2020

Since the 1980s, the efficient markets hypothesis has come under attack. Market anomalies were initially attributed to the actions of noise traders, who were believed to hold irrational beliefs and standard preferences. There was an expectation that such actors would lose their wealth over the long run via arbitrage, albeit that the effectiveness of arbitrageurs was restricted by various risks and costs....

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